Budget 2021 Summary for Businesses

In his recent ‘budget for the pandemic’ Chancellor of the Exchequer Rishi Sunak set out a number of measures that will affect both businesses and individuals.

Here we summarise the key points of the Budget 2021 that are most relevant to business owners and the self-employed.

Furlough extension

The furlough scheme, officially known as the Coronavirus Job Retention Scheme, has been extended until the end of September 2021.

Originally due to close at the end of April, the scheme will see employers expected to pay 10 per cent towards the hours their staff do not work in July, increasing to 20 per cent in August and September as the economy gets back on its feet.

Self-Employment Income Support Scheme extended

The Self-Employment Income Support Scheme (SEISS) has also been extended until September. A fourth grant under the scheme will run from February until April, covering up to 80 per cent of three months’ trading profits up to £7,500. A fifth grant will kick in to cover May to September.

For those whose turnover has dropped by 30 per cent or more, the fully 80 per cent grant will be available. However, for the self-employed worker whose turnover has fallen by less than 30 per cent, the grant will only cover 30 per cent of their income.

The good news is that the government is expanding access to SEISS grants so that more self-employed people will be eligible. Those who can now show they were trading in 2019 to 2020 via their tax returns will be able to claim for the first time.

National Living Wage to rise

The National Living Wage (NLW) will rise by 2.2 per cent from £8.72 to £8.91 from 1 April. This constitutes an annual pay rise of £345 for a full time employee n this rate.

The rate is currently only applicable to workers over the age of 25, however from 1 April, this will change, and those aged 23 and over will be in line for the higher amount. Those aged 23 or 24 and currently on the National Minimum Wage (NMW) rate for 21 to 24 year-olds, will see a pay rise of almost 9 per cent, which is something employers will need to be ready for.

Preparations will also need to be made as the NMW increases from £8.20 to £8.36 for 21-22 year-olds, £6.45 to £6.56 for 18-20 year-olds, £4.55 to £4.62 for 16-17 year-olds, and £4.15 to £4.30 for apprentices.

Corporation Tax rate to rise

From April 2023, the rate of Corporation Tax will rise from 19 per cent to 25 per cent, but only for those companies whose profits are over £50,000. For everyone else, the rate will remain unchanged.

The dividend tax threshold will remain the same at £2,000.

Capital Gains Tax threshold frozen

No changes were made to the Capital Gains Tax threshold. In fact, the current threshold has been frozen until April 2026.

This means that for now, individuals, personal representatives and some types of trusts can benefit from a £12,300 threshold before paying tax on profits from asset sales, whilst most trusts will be subject to a £6,150 threshold.

Income Tax threshold frozen from 2022

Whilst there was good news in the shape of no direct rise in income tax, the tax bill that people face may rise in future years.

Currently, people start paying income tax at a rate of 20 per cent when they earn £12,500 per year. For those who earn £50,000 plus per year, the rate is 40 per cent. These thresholds will increase from April 2021 to £12,750 and £50,270 respectively, but will then be frozen for five years until 2026.

This means that anyone receiving a pay rise may find themselves in a new tax bracket, or having to pay tax for the first time.

Need support claiming financial help during the pandemic? Talk to Office Assistants.

At Office Assistants, we have helped numerous businesses claim thousands of pounds in government assistance during the pandemic. If you could use some assistance making a claim under the extended furlough or SEISS schemes, or would like to discuss outsourcing your bookkeeping needs, you are welcome to get in touch.

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